NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.
Global Strategic Investments, LLC and Cesar Gabriel Hernandez (Principal) AWC/2009016158801/December 2010
Acting through Hernandez, Global Strategic failed to:
adequately implement or enforce its anti-money laundering (AML) compliance program, and to otherwise comply with their AML obligations, by failing to identify and analyze numerous transactions to determine if they were, in fact, suspicious and were required to be reported on a Suspicious Activity Report (Form SAR-SF), and
establish and implement customer identification procedures (CIP) for verifying a customerís identity.
The Firm and Hernandez permitted foreign customers to deposit funds into their accounts and, within days and/or weeks, disburse funds from their accounts to first and third parties, and in certain instances in amounts slightly below $10,000; although one customer told Hernandez he did this to avoid questions from his bank, the firm and Hernandez permitted the activity to continue and did not file a Form SAR-SF until approximately one year after the activity occurred.
Global Strategic Investments, LLC: Censured; Fined $150,000
Cesar Gabriel Hernandez: Fined $25,000; Suspended 3 months in Principal capacity only
Gary Michael Laskowski 2006003916901/November 2010
Associated Person Laskowski engaged in activity as a principal at a member firm without being registered in that capacity. Laskowski continued to act as an unregistered principal even though he had been cited in a Letter of Caution for acting as an unregistered principal.
Gary Michael Laskowski : Fined $10,000; Suspended 1 year
Mark Boyar & Company, Inc. AWC/2008011794901/November 2010
issued research reports that the firm labeled ďAsset Analysis FocusĒ (AAF) on a paid subscription basis;
did not consider the AAF a research report;
did not have in place policies and procedures designed to ensure compliance with the various research related rules applicable to firms that issue research reports, such as those relating to research analyst and research principal registration, disclosures, conflicts, annual attestations and written supervisory procedures;
allowed registered representatives at the firm to collaborate in the preparation of AAFs without having passed a qualifying examination,
allowed an individual also to collaborate in the preparation of AAFs without being registered as a general securities representative or in any other capacity through the firm, and without having passed a qualifying examination.
A general securities principal supervised the preparation of AAFs without having passed the qualifying examination.
Certain AAFs the firm issued failed to disclose certain NASD Rule 2711 required information, including the financial interest in the issuer of the research analysts who prepared the reports, price charts for issuers where the firm has assigned a price target for at least one year, and the valuation methods used to determine price targets and the risks that may impede achievement of the price targets.
An individual who collaborated in the preparation of AAFs purchased securities of companies during the 30-day period before the publication of the research reports concerning those companies. In addition, The firm did not have the required research report-related written supervisory procedures in place, and the firm did not have a senior officer make the required annual attestation that the firm had adopted and implemented the required written supervisory procedures.
Moreover, the Firm did not make the required annual attestations for several years and filed inaccurate annual attestations for other years.
Mark Boyar & Company, Inc. : Censured; Fined $20,000
York Securities, Inc. AWC/2008011762701/November 2010
The Firm operated a deficient Anti-Money Laundering (AML) program and failed to detect, investigate and report suspicious activity in connection to a firm customerís participation in a fraudulent stock-lending scheme through the firmís accounts.
The findings Firm's clearing firm advised it of a ďnegative hitĒ (any criminal, regulatory or civil action history) for an individual involved with a corporation that completed an online application to open an account at the firm through its trading direct division; after learning of the criminal action against the individual, the firm did not directly confront the individual or anyone associated with the corporation but instead, sent an email to the individual asking only whether or not it was correct that the individual had had a material monetary problem with a government agency, and the individual responded, confirming and stating the issue was resolved and there was no debt owed. The Firm informed the individual that it would open an account for the corporation on a cash only basis (i.e., no margin privileges).
The Firm's knowledge regarding the individualís criminal record was a red flag that should have caused it to give heightened scrutiny to activity in the corporationís account, but during a five month period, there were shares of securities valued at more than $12 million delivered into the corporationís account, in some instances by deposit of physical certificates. These shares were then sold within days of being received into the account, and the proceeds were then wired to a domestic bank account in the name of the corporation; the firm did not investigate any of these transactions or deem them to be suspicious and did not speak with anyone at the corporation regarding the transactions. The day after a customer presented a share certificate, he sent the firm a letter of authorization requesting the firm transfer the shares from his account to the corporationís account at the firm, and one week after the shares were transferred, the corporation sold the shares in separate sales transactions and the proceeds were wired to the corporationís domestic bank account. In addition, the sales of the stock, just a week after they were transferred from the customer to the corporation, were further red flags that should have caused the firm to ask additional questions concerning the transactions and consider filing suspicious activity reports (SARs).
Moreover, the Firm never followed up with the corporation to learn about the nature of its business activities and never obtained additional information regarding the fact it identified itself as a "loan underwriter" in its new account documents. Furthermore, the Firm did not follow its written customer identification program (CIP) procedures for individual customers domiciled in the United States; instead, the firm submitted customer names to its clearing firm to perform searches, which did not fulfill the firmís CIP responsibilities. For customers who were individuals domiciled in the United States, there was no record maintained as to how verification occurred, and no records as to whether the firm utilized documentary or non-documentary means for verification existed or were retained. In light of the firmís failure to conduct non-documentary checks, and failure to maintain records of the information used to verify customer identification, its CIP with respect to accounts for individuals domiciled in the United States was inadequate and failed to meet the standards of Section 326 of the Patriot Act, resulting in a willful violation of MSRB Rule G-41.
participated in securities related activities without employing a qualified municipal securities principal;
failed to timely file quarterly lists of issuers with which it engaged in a municipal securities business;
failed to adopt, maintain and enforce written supervisory procedures reasonably designed to ensure that the conduct of the broker and associated persons in municipal securities activities are in compliance with Municipal Securities and Rulemaking Board (MSRB) rules and that the procedures shall codify the brokerís supervisory system for ensuring compliance;
had an inadequate Anti-Money Laundering (AML) compliance program, in that it failed to
verify customer identification information,
conduct independent testing of its AML program,
designate a person to transmit contact information to FINRA and
to provide AML training for two years;
failed to timely create and maintain a business continuity plan and engaged in securities transactions without a qualified financial and operations principal (FINOP);
conducted a securities business while its net capital was below the required minimum;
failed to prepare an accurate general ledger, trial balances and books and records; and failed to file an annual audit report and a quarterly Financial and Operational Combined Uniform Single (FOCUS) report; and
failed to file an application for approval of a material change in its business operations even though it participated in an offering as an underwriter on a firm commitment basis, and disseminated sales literature that contained numerous inaccuracies and misrepresentations.
Also, the firm permitted Baldwin to engage in its securities business even though his registration was inactive because he had failed to complete a continuing education course.
FINRA's National Adjudicatory Council (NAC) imposed these sanctions following appeal of an Office of Hearing Officers (OHO) decision:
Richard Michael Bowers (Principal) 2006003916901/August 2010
As his firmís Chief Compliance Officer, Bowers permitted an individual, the agent of the firmís owner, to act as a firm principal without being registered to do so. Bowers failed to ensure the sufficiency of the firmís written supervisory procedures and failed to enforce the firmís requirement to document permission for outside business activities.
Richard Michael Bowers (Principal): Fined $5,000; Required to requalify in all principal capacities before resuming any principal activities; Suspended 2 months in Principal capacities only
Baron Capital, Inc.permitted an employee to actively engage in the management of its securities business, a function requiring principal registration, while the employee was not registered with FINRA in that capacity.
Baron Capital, Inc.: Censured, Fined $10,000 and Required to submit written certification and documentation that appropriate principal registrations have been obtained for all employees acting in a principal capacity.
Associated Person Bailey acted as his member firmís chief compliance officer even though he was not qualified by examination in the required capacities of general securities representative, limited representative corporate securities or general securities principal.
Joseph Arthur Bailey: Censured; Fined $10,000; Suspended 10 business days
Michael John Rukujzo (Principal) AWC/2007009609202/May 2010
Rukujzo participated in the negotiation and consummation of an Asset Purchase Agreement transaction, involving
another FINRA member,
a non broker-dealer entity, and
an entity which was a customer of his member firm.
The transaction resulted in the transfer from the other FINRA member of multiple customer mutual fund positions for which Rukujzoís firm had become the dealer of record to the dominion and control of his firmís customer (the entity), which exposed customersí accounts to losses as a result of the entityís speculative margin trading. Rukujzoís firm facilitated the transfer of certain positions held directly at mutual fund companies to an omnibus margin account held and maintained at the firmís clearing firm in the name of the entity, for which the firm was the broker-dealer of record. The Firm advised its clearing firm that the customers had authorized the use of their mutual fund assets as collateral when in fact, the customers did not sign any margin authorization forms, and information sent to the customers did not mention a margin account, the use of margin in investment strategies, or the use of the customerís assets as collateral to support margin trading in the omnibus account.
Rukujzo allowed an unregistered person to function as a representative and the firmís principal without being registered. Under Rukujzoís direction and control, his firm engaged in the change of dealer of record designation without the customerís authorization, and allowed his firm to participate in a transaction that he knew, or should have known, required approval from FINRA, and that approval was neither requested nor obtained.
Michael John Rukujzo (Principal): In light of of Rukujzoís financial status, no fine imponsed; Barred in Principal capacity only
Registered Principal Busacca failed to reasonably supervise the firm's operations and failed to diligently address numerous problems at the firm, including, but not limited to, inaccurate box counts, accurate securities position records, violations of section 220.8 of Regulation T of the Federal Reserve Board, failing to maintain margin requirements, failing to report data pursuant to NASD Rule 3150 and problems with transfers of customersí accounts. As the firmís President, Busacca permitted a non-registered person to act in a principal capacity as the firmís chief compliance officer.
The FINRA Hearing Panel (OHO) suspended Busacca for six months in all principal capacities and fined him $25,000 for failing to reasonably supervise the operations of North American Clearing, Inc., f/k/a Advantage Trading Group, Inc. (hereinafler, ďNorth AmericanĒ or the ďFirmĒ), in violation ofNASD Rules 3010 and 2110. The OHO Panel also fined Busacca $5,000 for permitting North American, as its president, to employ an unregistered chief compliance officer, in violation of NASD Rules 1022 and 2110. On appeal, FINRA's National Adjudicatory Council (NAC) sustained the OHO's findings and sanctions.
This decision has been appealed to the SEC and the sanctions are not in effect pending consideration of the appeal.
John Brian Busacca III : Fined $30,000; Suspended 6 months in Principal Capacity only
Eric Lowell Small (Principal) AWC/2007007345601/February 2010
While associated with his former member firm as a registered principal but not registered as a research analyst or a research principal, Small supervised the conduct of the firmís research analysts, including approving research reports they prepared and that his firm issued.
Small failed to establish and maintain adequate supervisory procedures concerning the review of
incoming and outgoing hard copy correspondence at the firmís branch offices that he was in charge of, and
outside investment activity of registered representatives at the firm.
The Firm's procedures indicated that a supervisory principal must review all correspondence, but these procedures were not reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules. The procedures were inadequate in that they contained insufficient detail concerning how and when such reviews were to occur, and the firm had no written supervisory procedures addressing the review of outside brokerage accounts. Small failed to establish, maintain and enforce adequate written supervisory control procedures relating to
NASD Rule 3012(a)(2)(B) and its requirement that members establish, maintain and enforce procedures reasonably designed to review and monitor transmittals of funds or securities between customers and registered representatives, and
NASD Rule 3012(a)(2)(C) and its requirement of an analysis and determination of whether producing branch office managers should have been subjected to heightened supervision.
Eric Lowell Small (Principal): Fined $17,500; Suspended 10 business days in Principal capacity only
Registered Principal Shino failed to file, or timely file, NASD Rule 3070 reports and amendments to Forms U4 and U5. Shino permitted a branch office with more than three representatives to transact an options business without having a registered options principal or limited principalĖgeneral securities sales supervisor as the principal office supervisor.
Ralph Matthew Shino: Suspended 9 months in Principal capacity only for late filing and failing to file NASD Rule 3070 reports and amendments to Forms U4 and Uniform Termination Notices for Securities Industry Registration (Forms U5); Suspended an additional suspension 3 months in Principal capacity only for permitting a branch office to operate without a principal. Suspensions to run consecutively.
Given the sexual politics on Wall Street, a lot of men in positions of authority "get the girl to do it" when it comes to something that seems a tad dicey from a compliance or regulatory perspective. Later on, when whatever the girl did blows up and the regulators come a knockin', well the old boys' playbook tends to call the same audible. The girl was ... Read On